QQQ Rising Megaphone in Rising Wedge

QQQ has Formed a Rising Megaphone (Bright Blue) in its Red Rising Wedge

QQQ has Formed a Rising Megaphone (Bright Blue) in its Red Rising Wedge

QQQ is now creeping up the top of the red rising wedge it began forming a year ago.  It’s working on the top for a price-channeled move within the rising wedge, and has also formed a rising megaphone (bright blue) inside the wedge.

That blue rising megaphone counts as a way of extending the wedge.  An extended rising wedge is a strong favorite to correct to its bottom once it finally breaks down.

The rising wedge has carried QQQ to the top of a rising megaphone that began in 2010 as well as the navy blue megaphone that began forming in the summer of 2014.

QQQ needs to retrace to at least VWAP of the orange megaphone, which would take it to the bottom of the red rising wedge.  It’s a favorite to correct sooner or later to the bottom of the navy blue rising megaphone at roughly 42.

And QQQ could remain stuck in the navy blue megaphone for years to come.

QQQ Long-Term Chart

QQQ Long-Term Chart

I’ve drawn a smallish fast top on the navy blue megaphone, but tops like this can take months to form.

Note also that the green scenario is a simple, standard way for the navy blue rising megaphone to extend.  That is another trading formation that could extend for years, though usually we’d see a return to the formation bottom first.

Crash Set-Ups

Neely Crash Call

IWM Megaphone Crash Set-Up

IWM has a Clear Crash Set-Up to the Bottom of its 3-Year+ Red Megaphone

Yesterday I posted that Glenn Neely has put out a public crash warning. He says the only other times he’s had this crash set-up were at the tops in 1987, 2000, 2007 and August 2015.

He said his crash call was based on current wave structure, U.S. margin debt, insider selling, overbought warnings from his Moat Index, a rising interest rate environment and the volume of new accounts being opened at brokerage firms in 2017 around the country.

Neely didn’t mention the collapse in new loans or the recent federal budget surpluses, but I’ve been concerned about those. The crash in new loans suggests a lack of new money formation. And Warren Mosler has written at length about the connection of Bill Clinton’s budget surpluses to the 2000 dotcom crash.

IWM Megaphone Crash Set-Up

And the long-term charts have great technical set-ups for a crash as well.  IWM is working on a top for the pink rising megaphone at the top of its 3-year+ red megaphone.  The red megaphone requires a move to at least VWAP when that top completes.  Neely is calling for a bigger crash, which would mean a move all the way to the red megaphone bottom. That would be the favorite scenario if IWM breaks through the red megaphone top to complete a top on the pink rising megaphone (purple scenario).

Neely is looking for his crash within the next 1-3 months.  IWM needs to work its way across the pink rising megaphone while forming a top, and that’s about how long that process will take.

ES Flat-Bottomed Megaphone Crash Set-Up

ES Flat-Bottomed Megaphone Top

ES has a Flat-Bottomed Megaphone Top on the Long-Term Chart with a Technical Target of 1200ish

ES has a series of rising megaphones in rising megaphones on its long-term chart as well as a huge flat-bottomed megaphone (red), which is also a head and shoulders with a megaphone right shoulder.  A breakout through the neckline at roughly 1800 would target roughly 1200.

Right now ES is working on interior rising megaphones (gray and navy blue) and is likely to complete a head and shoulders inside the bright blue rising megaphone before breakout.  In that case, a breakout from the blue rising megaphone would be a strong set-up to short.

QQQ Crash Set-Up

QQQ Needs a Retrace to its Silver Megaphone VWAP

QQQ Needs a Retrace to its Silver Megaphone VWAP

QQQ not only needs a retrace to VWAP of its silver megaphone, which started forming in June 2005, but also a retrace to its pink and blue rising megaphone bottoms near that VWAP.

It’s also working on the red megaphone and needs a crash to its bottom.

QQQ is working on an extended rising wedge top and is likely to complete a head and shoulders top inside the pink rising megaphone.  A combined breakout from that and the pink rising megaphone would be a strong set-up to short.

Crashes Usually Form Price Channels

A crash usually forms a price channel very close to the start of the crash. So I’ll be posting any price channel melt-down set-ups if we get one.

Better Entries

The heads of H&S tops inside rising megaphones usually form small H&S tops of their own. These are usually a terrific way to get into a crash set-up at the very top. I’ll post them if we get them.

Alternatives to a Crash

Every index has outs on the chart that could avert a crash, though every one requires at least some kind of significant dip soon. If those dips convert into more upward extensions, I’ll post that here.

QQQ Rollover Channel

QQQ has Rolled Out of its Blue Price Channel into the Red Channel

QQQ has Rolled Out of its Blue Price Channel & is Now Breaking the Red Channel Bottom

QQQ has broken out the bottom of the blue price channel it confirmed yesterday. After the breakout, it stopped for a short time at the bottom of the red rollover price channel.

It could have moved up the red channel from there to another new high (green, blue and purple scenarios), but instead it has continued down through the red channel bottom.

That means QQQ has started a top.

It will likely put in another new high in the course of forming the top (orange scenario), but QQQ is setting up a move to at least the gray megaphone bottom.  Beyond that it’s likely forming a larger top for a move to at least 100.

QQQ Rising Megaphones & Attempt at a Top

QQQ Rising Megaphones at This Point Almost Guarantee New HIghs After a Dip

QQQ Rising Megaphones at This Point Almost Guarantee New HIghs After a Dip

QQQ is approaching its navy blue rising megaphone top and is megaphoning its way to a tag of that top.  It’s approaching that top within the gray interior rising megaphone.

The Navy Blue Line is the Top of QQQ's Long-Term Rising Megaphone

The Navy Blue Line is the Top of QQQ’s Long-Term Rising Megaphone

QQQ has Just About Locked in a Scenario of Rising Megaphone Extensions

Both the gray rising megaphone and navy rising megaphone require a head and shoulders top to complete, with right shoulders that are bounces off the rising megaphone bottoms.  After a topping pattern like that, a breakout from a rising megaphone would usually mean a fast correction to its bottom.

QQQ also requires a dip to the VWAPs of the big red and orange megaphones on the daily chart before it can break out upwards from those megaphones.

So QQQ is a strong favorite to put in a significant dip fairly soon.

But QQQ has just about run out of time for getting back to those VWAPs in time to complete a proper head and shoulders top inside the gray rising megaphone.

QQQ would have to collapse from a fast tag of that navy blue line (green scenario) to have any chance of getting back to the gray rising megaphone bottom in time to complete a proper head and shoulders inside it.  But a high that was an exact tag of the navy line would virtually guarantee that QQQ would extend this move rather than break out of the rising megaphones and collapse.

That means QQQ is a favorite to head up to a new all-time high from the red megaphone VWAP once it finally gets down there (green scenario in top chart).  In the unlikely event QQQ corrected all the way to the megaphone bottoms (purple scenario on the daily), it would be a favorite to melt up to the megaphone tops after.

Note that the green scenario as drawn is just a rough idea of how this will play out.  The real scenario could play out much differently.  Specifically, I doubt we’d see the big red megaphone VWAP again.

A more realistic green scenario will be easier to draw after QQQ finally tops for the required dip to the red megaphone VWAP.